JHX, SGM

Some minor celebration, as Hardies and SGM meaningfully downgrade.

Here’s SGM.

Here’s JHX.

We’ve been calling for this for some time, based on our view that the mortgage rate repricing cycle would “hardstop” the housing market, and it is good to see it playing out.

We’ve been hit with downgrades we didn’t see coming, such as IRE, mind you, and we certainly didn’t see the MPL hacking scandal coming, so, limited celebrating.

The problem for both companies is that they are still over-earning, on an appeal to history. You can see just how cyclical they are, and, at least at a glance, you can see that the cycle, when it draws down, has typically much further to run.

The pandemic (everyone buying homes, b/c there’s nothing else to spend on and everyone wants their own space/place/mortgages-are-cheap) kicked earnings to the moon, that’s now in hard reverse, and could easily halve from here.

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